May 16 (Bloomberg) -- Denmark’s opposition bloc said a
proposal to raise capital buffers for the biggest banks is too
draconian as lawmakers fail to find common ground on how to
treat the lenders.

The Liberal and Conservative parties are signaling they’ll
probably vote against a proposal laying out standards for
Denmark’s systemically important financial institutions, their
parliamentary business committee spokesmen said.

The government-appointed Sifi committee in March identified
Denmark’s six biggest banks as systemically important to the
$300 billion economy and argued the lenders should hold as much
as 5 percent extra capital. The move is the latest in a string
of steps that has placed Denmark at the forefront of regulatory
reform in the European Union. The nation in 2011 forced losses
on senior creditors in the EU’s first bail-in. Legislators in
the 27-nation bloc have yet to agree on too-big-to-fail rules
for banks.

“We don’t need to be first movers on this in Europe,” Kim
Andersen, the parliamentary business committee spokesman for the
Liberal Party, said in an interview. “We would like the capital
requirements to be lower.”

Andersen’s counterparts at the Conservative Party, Brian
Mikkelsen, and the Danish People’s Party, Hans Kristian Skibby,
agree, the two said in interviews. The Social Democrat-led
government of Prime Minister Helle Thorning-Schmidt needs the
support of the Liberals and Conservatives to pass the Sifi
proposal because the two parties are in an accord group on bank
regulation in which unanimity is required.

‘Snail’s Pace’

“We should move at a snail’s pace on this to avoid
implementing too much regulation and wait for the rest of
Europe,” Skibby said.

Denmark’s economy contracted 0.7 percent in the final three
months of last year and may have shrunk in the first quarter,
according to estimates by Svenska Handelsbanken AB and Danske
Bank A/S. Denmark is the Scandinavian nation hardest hit by the
debt turmoil raging in the euro zone as it struggles to emerge
from a burst housing bubble and regional banking crisis.

“This will have consequences,” Andersen said. “If we
want to get an economic upturn going we shouldn’t limit the
access to credit too much.”

Business groups including the Confederation of Danish
Industry have argued that additional capital requirements risk
choking capital and hurting their members. Small and medium-sized businesses employ about two-thirds of the nation’s
workforce.

Denmark’s financial industry has assets that are nearly
four times the size of the economy. Danske Bank’s assets alone
are close to twice Denmark’s gross domestic product.

Government lawmakers have shown willingness to ease some
parts of the Sifi proposals. Benny Engelbrecht, who heads
parliament’s business committee for the ruling Social Democrats,
said in an interview this month lawmakers may be ready to
consider softer regulatory triggers at which Sifis must convert
debt into equity.

Banks have also lobbied lawmakers to introduce more
explicit language into the final legislation on government
backing. The current proposal is too vague, Danske Bank Chief
Financial Officer Henrik Ramlau-Hansen said in a May 2
interview. Sifis should be exempt from Denmark’s bail-in laws,
he said.

That’s unlikely to happen, according to Engelbrecht.

“We won’t back giving Danish Sifis explicit government
support,” he said this month.